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HMRC internal manual

VAT Fraud

What to consider prior to determining whether to use an intervention: getting to know the business: understanding the taxable person's business

Having documented the taxable person’s business model and the market in which he trades or intends to trade (VATF32100) you now need to fully understand and document the way the taxable person’s business operates. You should do this at the very beginning of an assurance visit, with periodic updates (clearly dated) to ensure that if the business changes those changes are properly documented.

The type of things you should document include:

  • the main business activity(ies) and any subsidiary or non-business business activity(ies);
  • the structure and organisation of the business, including any warehousing facilities used, assets held, bank accounts held and used, accounting and due diligence procedures operated;
  • whether the taxable person acquires, imports, dispatches or exports goods, what goods are involved and the overall percentage of the net outputs/inputs;
  • whether the taxable person receives services from abroad and what those services are;
  • the principle outputs and inputs, showing those that are standard rated, zero rated, exempt and outside-the-scope;
  • public notices held or presented during the visit;
  • discussions concerning fraud awareness;
  • the records studied during the visit; and
  • what type of due diligence and/or risk assessments have been undertaken on suppliers and customers.

The above list is not exhaustive.

It is important to bear in mind that there should be a full and complete picture of the taxable person’s business held in the Electronic Folder (EF), which covers all aspects of that business and not just certain transactions in isolation.

You can find further guidance in V1-37, as well as the Missing Trader Intra-Community Fraud Specialist Investigations Operational Guidance.

You can compare and contrast the differences in the way he conducts the different business streams (VATF32300).